Chapter 7 - Chapter 7 Accounting for the Business type...

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7.1 Chapter 7 Accounting for the Business type activities of state and local governments (Proprietary funds: internal service funds, enterprise funds) Accounted for in manner similar to for-profit enterprises: 1. Accrual basis 2. Statement of net assets (balance sheet) 3. Statement of revenues, expenses, and changes in fund net assets 4. Statement of cash flows 5. Account for their own fixed assets, acc depreciation, depreciation expense, and debt (long and short-term) 6. Do not usually have legal budgets (should have internal budgets for planning and control purposes) Internal service funds: 1. Set up to provide services to other funds, departments/programs etc. (Not to general public) 2. Pricing: Should use full cost (direct and indirect costs) plus margin to allow for necessary replacements, modernization, expansion, debt service (Billings to other departments/programs should be less than if used outside vendors) 3. Initial and subsequent contributions of cash, other assets, to establish, enlarge fund: Assets received (FMV) Interfund transfers in 4. If must eventually repay transfers: Assets received Interfund loan from (fund name) 5. To record billings for services, supplies: Due from (fund name) Billings to departments 6. Grants, entitlements, shared revenues: If restricted for capital acquisition, construction, etc: Treat as equity: Contributions from (name source) 7. Operating grants; grants, entitlements, shared revenues: If can be used for either operations or capital outlays: Treat as nonoperating revenue (name source) (Not as contributed capital)
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7.2 8. All grants from internal service fund to governmental funds: Treated as revenue by the receiving fund 9. Depreciation expense for contributed assets or assets acquired under a capital grant can be closed to either: 1. Contributed assets, or 2. Unrestricted net assets 10. Assets acquired under lease agreements: 1. Operating leases: Expense 2. Capital leases: 1. Capitalize at lesser of: 1. PV of minimum lease payments 2. FMV of the leased property 2. Amortized over lease term unless: 1. Transfer of title 2. Bargain purchase option (If either of above: use estimated economic life) 3. Allocate lease payments between interest and principal components (effective interest method) 11. If have manufacturing activities: 1. Process costing; standard costing 2. Job-order costing 12. If used as a financing device: 1. Risk financing and related insurance activities: 1. Recognize revenues and claims in same manner as public entity risk pools 1. Recognize claim when either: 1. All of the following
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This note was uploaded on 02/19/2011 for the course MISC 101 taught by Professor Smith during the Spring '11 term at University of Louisiana at Lafayette.

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Chapter 7 - Chapter 7 Accounting for the Business type...

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